12 - The Protocol Sink Thesis

How DeFi protocols become the foundation for everything

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Episode: #12
May 18, 2020

When someone gives you money how confident are you that it's really yours? That's a settlement guarantee. It operates at the base layer of our societal tech stack and usually requires law and nation-states to enforce. With crypto we have something new, we have settlement assurances. That changes everything.

Protocols with higher settlement assurances are more dense. They sink to the bottom of our societal tech stack and become the foundation for everything else. This is the protocol sink thesis, that DeFi protocols with the highest settlement assurance will become the base layer..the base layer for crypto banks, commercial banks, and even nation-state banks.

When enough value is locked and enough time has passed, the money protocols win. That's what the thesis predicts!

Dive into the protocol sink thesis w/ Ryan & David!

We cover:

  • Settlement guarantees through time

  • Legal system settlement & traditional finance

  • Why protocol settlement changes everything

  • Protocol Sink Thesis ("How DeFi Wins")

    • Why Trusted things get built on

    • How DeFi protocols sink

    • Time Value Locked as the meter stick

  • How to test the thesis

  • The transition to long-term thinking

Understanding this thesis will help you become a better crypto investor.

Before the episode begins we also talk about:

  • ETH FUTURES!

  • Grammy-award winner RAC issues on Ethereum

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Resources discussed:

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Episode Actions:

  1. Watch David talk about this at Ethereal 

  2. Watch for evidence of protocol sink thesis:

    • Crypto exchanges add DeFi protocols

    • Trustless stablecoins like DAI taking from USDT

    • Stablecoins issued on public chains like Ethereum

    • More value flowing into BTC and ETH

  3. Give Bankless a 5-star review on iTunes right now!

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